Nike shares are trading lower after-hours: here’s why

Nike Inc (NYSE: NKE) said on Thursday its earnings beat Wall Street estimates in the fiscal first quarter. Shares of the company, however, fell about 5.0% in after-hours trading as investors focused on revenue that came in lower-than-expected.

Analyst Sam Poser on sales miss

Williams Trading’s Sam Poser attributes the sales miss to supply chain issues in Vietnam, where Nike produces about 30% of its apparel and 50% of its footwear. On CNBC’s “Closing Bell”, he said:

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The supply chain has been an issue since the demand is exceptionally strong. The gross margin shows that. But their sales were flat year over year, showing they’re having problems in getting their inventory through. We believe that the biggest issues are going to occur in late Q2 and into Q3.

Poser has a “buy” rating on Nike with a price target of $196 that represents an over 25% upside from here.

Q1 financial performance

Nike reported $1.87 billion of net income for the first quarter that translates to $1.16 per share. In the same quarter last year, its net income was capped at $1.52 billion or 95 cents per share, as per the earnings press release.

The athletic apparel company generated $12.25 billion in sales versus the year-ago figure of $10.59 billion. According to Refinitiv, experts had forecast $1.11 of per-share earnings on $12.46 billion in revenue.

Gross margin and future guidance

Nike noted an 11% and a 15% growth in sales in Greater China and North America, respectively. Its digital sales were up 29% in the recent quarter. The American multinational’s gross margin climbed by 170 basis points to 46.5%.

Earlier this year in June, the U.S. firm said its revenue will surpass $50 billion this year. Nike did not update guidance on Thursday.